GD Midea v Tornado: Setting Aside Arbitral Award for Breach of Contract
In a dispute between GD Midea Air Conditioning Equipment Co Ltd (Midea) and Tornado Consumer Goods Ltd (Tornado), the Singapore High Court heard applications in Originating Summons No 15 of 2017 and Originating Summons No 43 of 2017 concerning an arbitral award. Midea sought to set aside the award, while Tornado sought to enforce it. The court, presided over by Chua Lee Ming J, ruled in favor of Midea, setting aside parts of the award due to the tribunal acting in excess of its jurisdiction. The case involved a breach of contract claim related to an International Exclusive Distribution Agreement.
1. Case Overview
1.1 Court
High Court of Singapore1.2 Outcome
Originating Summons No 15 of 2017 allowed in part. Consequently, the Enforcement Order was set aside in part and OS 43/2017 was dismissed in part.
1.3 Case Type
Civil
1.4 Judgment Type
Grounds of Decision
1.5 Jurisdiction
Singapore
1.6 Description
Singapore High Court sets aside part of an arbitral award due to jurisdictional overreach, concerning a breach of contract dispute between GD Midea and Tornado.
1.7 Decision Date
2. Parties and Outcomes
| Party Name | Role | Type | Outcome | Outcome Type | Counsels |
|---|---|---|---|---|---|
| GD Midea Air Conditioning Equipment Co Ltd | Plaintiff, Respondent | Corporation | Appeal allowed in part | Partial | |
| Tornado Consumer Goods Ltd | Defendant, Appellant | Corporation | Appeal dismissed in part | Lost |
3. Judges
| Judge Name | Title | Delivered Judgment |
|---|---|---|
| Chua Lee Ming | Judge | Yes |
4. Counsels
4. Facts
- Midea and Tornado entered into an International Exclusive Distribution Agreement on Midea Brand Home Appliances (MBA) in August 2011.
- Clause 2.2 of the MBA entitled Midea to terminate the MBA if Tornado failed to achieve the Annual Sales Target in any year.
- Tornado failed to achieve the Annual Sales Target for 2013.
- Midea gave Tornado 60 days’ written notice of termination of the MBA on 28 January 2014.
- Tornado commenced arbitration against Midea, claiming the termination notice was invalid.
- The arbitral tribunal found that Midea had breached clause 4.2 of the MBA by imposing payment terms in PI-1325.
- Midea applied to set aside the arbitral award, arguing the tribunal acted in excess of its jurisdiction.
5. Formal Citations
- GD Midea Air Conditioning Equipment Co Ltd v Tornado Consumer Goods Ltd and another matter, , [2017] SGHC 193
6. Timeline
| Date | Event |
|---|---|
| Tornado started purchasing residential air-conditioners from Midea. | |
| Midea and Tornado entered into the International Exclusive Distribution Agreement on Midea Brand Home Appliances and the Exclusive Original Equipment Manufacturer Supply Agreement. | |
| Tornado commenced the sale of Midea-branded air-conditioners in Israel. | |
| Parties met at Midea’s headquarters in Beijiao, PRC. | |
| Midea returned the Deposit to Tornado at Tornado’s request. | |
| Midea entered into a supply agreement with Electra Consumer Products (1951) Ltd. | |
| Tornado sent Midea a purchase order for 13,170 sets of Midea-branded air-conditioners. | |
| Midea sent Tornado pro forma invoice 1325. | |
| Tornado placed two orders for a total of 55,292 sets of Midea-branded products. | |
| Tornado sent Midea a letter of credit for US$3,201,441.50. | |
| Midea replied, declining to produce the sets covered in PI-1325. | |
| Midea gave Tornado 60 days’ written notice of termination of the MBA. | |
| Tornado placed further orders for 54,494 sets of Midea-branded products. | |
| At Tornado’s request, Midea sent Tornado a revised price list. | |
| Tornado placed orders using the new prices (while reserving its rights). | |
| Midea sent a pro forma invoice for 6,095 sets with the payment term stated as “100% TT before delivery. | |
| Tornado commenced the Arbitration against Midea. | |
| The tribunal constituted for the Arbitration issued the Award. | |
| Hearing date. | |
| Decision date. |
7. Legal Issues
- Breach of Contract
- Outcome: The court found that Midea had breached clause 4.2 of the MBA by imposing payment terms in PI-1325, but the arbitral tribunal exceeded its jurisdiction in making this finding.
- Category: Substantive
- Sub-Issues:
- Improper termination
- Breach of payment terms
- Jurisdiction of Arbitral Tribunal
- Outcome: The court held that the arbitral tribunal acted in excess of its jurisdiction by deciding on an issue (breach of clause 4.2 of the MBA) that had not been submitted for its determination.
- Category: Jurisdictional
- Sub-Issues:
- Exceeding scope of submission to arbitration
- Breach of agreed procedure
- Breach of Natural Justice
- Outcome: The court found that the Tribunal’s finding on cl 4.2 was in breach of the rules of natural justice because Midea was denied a full opportunity to present its case.
- Category: Procedural
- Sub-Issues:
- Denial of fair hearing
- Failure to provide opportunity to present case
8. Remedies Sought
- Setting aside of arbitral award
- Enforcement of arbitral award
- Damages for breach of contract
9. Cause of Actions
- Breach of Contract
10. Practice Areas
- Arbitration
- Commercial Litigation
11. Industries
- Manufacturing
- Consumer Goods
12. Cited Cases
| Case Name | Court | Affirmed | Citation | Jurisdiction | Significance |
|---|---|---|---|---|---|
| CRW Joint Operation v PT Perusahaan Gas Negara (Persero) TBK | Singapore Court of Appeal | Yes | [2011] 4 SLR 305 | Singapore | Cited for the principles regarding setting aside arbitral awards under Art 34(2)(a)(iii) of the Model Law, specifically when the arbitral tribunal improperly decided matters that had not been submitted to it. |
| PT Asuransi Jasa Indonesia (Persero) v Dexia Bank SA | Singapore Court of Appeal | Yes | [2007] 1 SLR(R) 597 | Singapore | Cited for the two-stage inquiry involved in assessing whether an arbitral award ought to be set aside under Art 34(2)(iii) of the Model Law. |
| TMM Division Maritima SA de CV v Pacific Richfield Marine Pte Ltd | Singapore Court of Appeal | Yes | [2013] 4 SLR 972 | Singapore | Cited for the principle that the arbitral tribunal has no jurisdiction to decide any issue not referred to it for determination. |
| AMZ v AXX | Singapore Court of Appeal | Yes | [2016] 1 SLR 549 | Singapore | Cited for the requirements to set aside an arbitral award on the ground of breach of agreed procedure under Art 34(2)(a)(iv) of the Model Law. |
| Soh Beng Tee & Co Pte Ltd v Fairmount Development Pte Ltd | Singapore Court of Appeal | Yes | [2007] 3 SLR(R) 86 | Singapore | Cited for the requirements to set aside an arbitral award under Art 34(2)(a)(ii) of the Model Law or s 24(b) of the IAA, specifically regarding breach of natural justice. |
| L W Infrastructure Pte Ltd v Lim Chin San Contractors Pte Ltd and another appeal | Singapore Court of Appeal | Yes | [2013] 1 SLR 125 | Singapore | Cited for the test of whether the arbitral tribunal could reasonably have arrived at a different result if not for the tribunal’s breach. |
| Grant Thornton International Ltd v JBPB & Co (A Partnership) | High Court of the Hong Kong Special Administrative Region | Yes | [2013] HKCFI 523 | Hong Kong | Cited regarding the interpretation of decisions on matters beyond the scope of the submission to arbitration. |
13. Applicable Rules
| Rule Name |
|---|
| No applicable rules |
14. Applicable Statutes
| Statute Name | Jurisdiction |
|---|---|
| Article 45 of the PRC Contract Law | People’s Republic of China |
| Article 67 of the PRC Contract Law | People’s Republic of China |
| Article 94(4) of the Contract Law of the PRC | People’s Republic of China |
15. Key Terms and Keywords
15.1 Key Terms
- Arbitral award
- International Exclusive Distribution Agreement
- Annual Sales Target
- Termination Notice
- Pro forma invoice
- Letter of credit
- Breach of contract
- Jurisdiction
- Natural justice
- UNCITRAL Model Law
- Prior practice
15.2 Keywords
- arbitration
- breach of contract
- setting aside award
- jurisdiction
- singapore
- international arbitration
17. Areas of Law
16. Subjects
- Arbitration
- Contract Law
- Civil Procedure